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Google needs Slack more than Amazon does

This is about attracting developers.

Slack CEO Stewart Butterfield
Asa Mathat

If Amazon buys Slack, not only will it increase its share of the cloud marketplace, it will also own a tool favored by developers, a crucial constituent that can draw in new cloud customers.

This kind of growth for Amazon would be a problem for Google, which is competing to win more customers for its own cloud service that trails Amazon Web Services.

Amazon’s overture to Slack will likely spur Google to make a move of its own. Here’s what Google could do:

Google could make a counter offer. Google already partners with Slack, and it could try to out-bid Amazon. Parent company Alphabet is well positioned to make any number of acquisitions, and it’s very focused on bolstering its cloud offering.

What makes Slack valuable for a cloud offering is how the messaging platform integrates with developer tools. That means Slack allows developers to more efficiently work with the tools that they already use, including by allowing them to search past conversations to find instances where they used different tools.

Developers matter when it comes to gaining cloud customers because they often are in charge of their own spending when building specific apps, according to Menlo Ventures managing director Matt Murphy, who invests in enterprise startups. However, decisions like shifting an entire company over to a cloud still come down to executives who are more concerned about cost than developer tools.

But a main reason Google might want to buy Slack is just to keep it out of the hands of Amazon, which already dominates the cloud market.

Amazon is the largest cloud provider, with $12.2 billion in sales last year. Microsoft Azure, by comparison, brought in an estimated $2.7 billion. Google cloud’s revenue comes in third, and was previously estimated at about $1 billion.

Google could buy another company that would attract developers. Other than Slack, there are other companies popular with developers that Google might be interested in acquiring in order to continue to attract developers as cloud customers, said Murphy.

Atlassian, which makes project management tool Jira, fits that description. It’s used by engineers to collaborate on projects and track bugs. Sales of Jira, its other collaboration tool, Confluence, and its communication tool HipChat compose most of the public company’s more than $450 million in annual revenue.

Another company that would help Google lure in developers is Github, which lets engineers store and edit code and has some similar offerings to Atlassian, like tools for tracking bugs and for task management. Google launched a Github competitor in 2015, Cloud Source Repositories, but it isn’t as popular or well known as Github.

There’s also Salesforce, which might make sense as an acquisition target. Salesforce’s technology, which helps companies manage their clients, could help Google expand its cloud footprint by bringing in workplace communication features and developer tools.

Google could put more resources into its own messaging options. Google is currently known more for its messaging tools than Amazon, and probably won’t want to lose that edge. Both companies are putting effort into expanding their productivity offerings and making them more attractive to enterprise customers.

Earlier this year, Google introduced a revamped version of its Hangouts communication offering. The new interface looks a lot like Slack, with threading and virtual rooms (similar to channels) for users to communicate within. Google also announced it would add an artificially intelligent bot to Hangouts to help workplaces with scheduling meetings.

Google probably doesn’t want to stop improving in this area, especially considering Amazon is putting resources into developing out its own offerings. Whether it buys Slack or not, Amazon is trying to make its workplace productivity tools like WorkMail and WorkDocs more competitive with Google and Microsoft.

This is especially a problem for Google because even if its communication tools are overall more popular than those of Amazon, that popularity is mostly in the consumer space. The leader in productivity tools for enterprise customers is Microsoft. (Although, G Suite productivity tools are pretty popular with startups.)

Recode has reached out to Google for comment.

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